In 1980, the iconic phone company, AT&T asked one of the smartest consulting companies around, McKinsey this question:

How many people will be using cell phones 20 years from now in the year 2000?

McKinsey sharpened its pencils and came back with an answer: 900,000 people. The actual number of cell phone users in the year 2000 was a 109 million, and today 900,000 new subscribers turn on their smartphones for the very first time every three days.

I tell this story because sometimes things in tech get adopted much faster than the experts expect them to and I believe we’re at the cusp of another of these massive very fast tech adoptions and in particular I think we’re headed towards electric powered, self-driving fleets of cars as opposed to the individually owned and operated gas-powered cars that we drive around today.

This is the first post in a series of posts, on emerging technologies, especially on the future and impact of Autonomous Automobiles on different industries like Energy, Insurance, Finance, Justice, E-commerce, and Public Infrastructure. In this post, we will talk about why I think it is going to happen, faster than we think.

I want to spend a few minutes talking about what does the world look like if this happens because it’s only a matter of time before we make this transition and I believe we’re at an inflection point where tech adoption could disseminate throughout the world, much faster than we expect.

I believe that in a handful of years we’re going to be driven around in electric cars rather than driving around in our own gas-powered cars, in other words, most of the miles driven on the planet will shift to self-driving the electric car fleets as opposed to us driving around ourselves.

What I want to explore is its implications. What happens to the way we buy cars? What happens to the value chain? What happens to insurance? What happens to the energy infrastructure?

I want to explore broadly on the things which will change in our everyday lives when this shift happens. But first, let me make the case that this shift is going to happen faster than we expected. First, let’s talk about electric cars. May I present to you the 1914 electric model 47, an all-electric car available in 1914.

People loved this car. It was quiet, it had a range of 80 miles, it didn’t need to be hand cranked to start, and it was reliable. So, you didn’t need a fleet of mechanics on standby to make sure that your car wouldn’t break down. A lot of celebrities of the day drove this car, Thomas Edison, Mamie Eisenhower john d Rockefeller Jr., and very famously Clara Ford the wife of Henry Ford. In fact, a lot of people don’t know that in 1900, nearly a third (28%) of all cars produced were actually electric. But today, the overwhelming majority of the cars that we drive are gas-powered. If you look at this chart(below), the electric cars are shown in blue. I’m being generous here, I’m including all the hybrids, all the plug-in hybrids as well as all the all-electric cars like the Tesla.

Source: PHEV Sales, Bureau of Transportation Statistics

You can barely see them(electric cars) on this graph of total car sales now. There are a few outliers, Norway is almost 50% now, the Netherlands is 6% electric, California’s 5% electric. But overall, under 3% of today’s sales of cars are electric. So it’s about 500,000 out of 18 million cars sold in the U.S.

Why is this? If electric cars were available at the turn of the century and they had all these benefits, they were quiet, they had a good range, they were reliable. Why don’t we drive electric cars today?

Well, the simple answer is economics. In 1914, the Model T cost $440. It was anywhere between 2 and 6 times cheaper than the Detroit electric, that I showed you above. Not only was it dramatically cheaper, but it could also go faster, 45 miles per hour versus 20. It could also go farther, 200 miles versus 80.

Despite the overwhelming dominance of internal combustion engine cars, The Economist last August wrote an article that was essentially an obituary for the internal combustion engine. Why is this? Why did the Economist write the obituary?

Well, if you look at the cost curves for electric cars they are coming down fast.

Source: Bloomberg

The most expensive part of an electric car today is the battery, and battery prices are falling very quickly as production ramps up like Tesla’s Gigafactory. Most analysts assume that electric cars will be as cheap to produce as gas-powered cars with no government subsidies by 2025.

Electric cars also have radically fewer moving parts and presumably as a result radically longer useful lives and radically improved reliability. If you look at a Tesla or a Leaf, in an electric car and compare it to an equivalent internal combustion engine car, the number of moving parts and electric cars is anywhere between one and two orders of magnitude fewer moving parts. As a result,

Most people expect electric cars to last for 500,000 to a million miles compared to internal combustion engine cars which have an expected lifetime of closer to 200,000 or 300,000 miles.

So we’ll have cars that cost less to produce and last much much longer and I believe these trends have emboldened new companies to get into the car making business, that never would have gotten to the car making business otherwise.

My favorite example of this is the British company Dyson, which is well known for its vacuum cleaners and bladeless fans. It’s committed to launching a car by 2020 and has invested two billion pounds to date in bringing that car to market, and has more than 400 people working on it. I believe that had we not been in the middle of this shift to electric cars, in other words, if Dyson had to make an internal combustion engine car, it never would have greenlit this project. Now the incumbents aren’t just going to give up and roll over. They are also making huge investments in this direction. Now I personally love a good Twitter fight and especially ones that involve Elon Musk.

#TwitterWars #Elon

Here’s one from September 25th of 2017, USA Today wrote that Mercedes weighs making a billion dollar bed, to take down Tesla and Elon Musk replies to the tweet saying, “hey Mercedes that’s awesome but you’re a much bigger company a billion dollars is not a lot of money” to which Daimler actually replies, I love it “you’re absolutely right. You’re missing a zero. We’re investing a billion dollars in the battery production. We’re investing ten billion dollars to electrify our fleet” to which Elon Musk says “good”.

#TwitterWars

As further evidence that the incumbents aren’t just going to wait for the startups to steal their market here’s a chart that shows you a wide variety of electric power cars that are available on the market today and this number is growing rapidly.

Source: Bloomberg

So think of those as the carrots, in other words, the things that the marketplace is doing to encourage us to buy and drive electric cars.

We’re also going to have a set of sticks in the form of government regulations. There are already a set of countries that have laws on the books that outright ban the sale of gas-powered cars. The Netherlands by 2025, also Norway, India by 2030, Scotland by 2032, and so on. Along with the outright bans, there’s going to be targets for electric vehicle sales, that each country sets, that will dramatically encourage existing companies that are selling gas-burning cars to invest heavily in electric cars.

We’re going to have jurisdictions introduce rules of their own. Everybody’s waiting for the big dogs, so to speak, to write down their rules around when it will forbid the sale of gas burning cars and I’m talking about countries like Germany, China, California and then the United States overall. So there’s going to be a combination of carrots and sticks encouraging us to get into electric cars.

Source: Bloomberg

So you take all of those ingredients and Bloomberg is forecasting 2038, as the year where electric cars reach parity in terms of sales with gas burning cars and then they never look back. That will be the year of peak gas car production, 2038. Keep that in mind and we’ll come back to this in a later part of the post.

All right, so that’s my case that self-driving cars are happening fast. Let’s talk about the other component of it, which is the self-driving component. All the car manufacturers and a set of startups in Silicon Valley and around the world are working hard on this technology. Apparently, if you are going to innovate in the car you always start in the trunk.

There are a set of cars that you can already buy, that have partial self-driving car capabilities, in the way I like to think about it is these cars will mostly drive themselves on the freeway. They’ll keep a safe distance between you and the car in front of you. They’ll keep in the lane even if the lane curves, and you’re responsible for driving the car after it gets off the freeway. But these are cars that you can buy today, and I’m not talking about luxury cars only. You can buy cars in the $20,000 price range with a $2,000 option, with a lot of these capabilities. So something like the Honda Civic with the Honda sensing suite.

Also, around the world, we have progressive mayors and city leaders that are leaning into this revolution and are encouraging car manufacturers to run their trials in their city.

Altogether there are 40 cities around the world actively piloting today and there’s another 20 waiting to start their electric car trials. With all this activity you’d expect both, a lot of startup activity and a lot of activity in the existing manufacturers and that’s exactly what you see. You see an all-out amazing race between the incumbents, both manufacturers, and companies in the supply chain. You see an amazing number of startups primarily located in Silicon Valley and China, that are trying to take advantage of this opportunity and building self-driving technology, that can go into any car.

So you put these two ingredients together, the transition to electric cars and the transition to self-driving. And actually, the combination of these technologies is perfect for fleet operations. So instead of buying and operating our own cars, these things will be perfect for fleets to operate. One of the big reasons is the utilization of our own cars. Our cars are utilized maybe 5% of the day today. So, if you have a typical community, we might be driving 20 or 30 minutes. That means your cars are used for an hour out of the 24 hours of the day and it’s not driving anybody else around during that time. So from a fleet operators point of view, they can do much better than 5% utilization and the economics will dictate that most of our electric self-driving cars will end up in fleets because it’s going to be much more economically efficient for the fleet to get the most out of that car, compared to you and me driving them around.

So if you boil it down to what’s the cost to own and operate a car today, it’s much more expensive to be driven everywhere. So if you decided that you couldn’t commit to a lift anywhere to diet it would cost you a lot more to do that today than it would be to drive your own car so that’s the left side of these bar graphs.

RethinkX, a nonprofit is predicting that the cost curves will completely reverse themselves in other words by 2030 which is not that far away it will be a lot cheaper to basically lift anywhere compared to owning and operating your own car. I think that a lot of people will start shifting when the prices are close. I think a lot of people would prefer to be driven around, and if it’s even cheaper to be driven around than to drive your own car, I think this is going to be a mass-market phenomenon.

So the technology trends suggest that we’ll have self-driving electric cars. But, will the people be ready? Will, we culturally be ready for the world in which we’re driven around rather than driving ourselves around. It’s a big shift. Well, as with most things these revolutions will probably begin with the younger generations.

This is an answer to a survey question that Morgan Stanley and BCG ran(in 2016) and the question they asked essentially was, “how many times are you already Lyft and Uber“ing” around?” and as you can see the 18-24-year-olds are doing it monthly or several times a month, and 13% of them are doing it every day. This number drops off for the elderly. But the young people look amazingly ready for this revolution.

Also, a lot of people who have been left out of the labor market, left out of the freedom of mobility, that driving your own car represents. There are older people, people with disabilities, people with blindness, people who don’t have the hand-eye coordination to pass their driver’s license exams anymore. So there’s a whole set of people that can get back into society. They can take jobs, they can visit with friends, they can go shopping.

So the net of it is, this revolution will come on the backs of the young people who are absolutely ready, culturally, to make this transition and it’s going to re-enfranchise. It’s going to bring a lot of people who have been left out of the benefits of driving around right back into society, the older, the less capable the people who can’t drive themselves around. So, for both ends of the demographic, self-driving an electric car fleets will be awesome.

So let’s assume for a second that I’m right and we’ll put aside the question of when, until the very end of the series. We’ll pick that up at the end of the series. In the coming parts, we’ll explore how the world changes in six different areas, the area of public infrastructure, energy, finance, the justice system, and shopping. We will discuss on how does our everyday life change when we live in this world where we’re driven around in electric cars rather than driving our own gas-powered cars.